POLARIS Industries Inc. (the parent company of both Victory and Indian Motorcycles) has reported record third quarter net income from continuing operations of $140.8 million for the quarter ended September 30, 2014, an increase of 20 percent from the prior year’s third quarter net income from continuing operations of $116.9 million. Sales for the third quarter 2014 totaled a record $1,302.3 million, an increase of 18 percent over last year’s third quarter sales of $1,102.6 million.
“Our strong third quarter results reflect the continued execution of our long-term strategy and broad strength across our industry-leading portfolio,” said Scott Wine, Polaris’ Chairman and CEO. “Amid heightened competition we garnered strong retail sales in all categories, even as we introduced more than 20 new off-road vehicles and motorcycles and over 300 new complementary accessories for our consumers.
“Along with industry-leading innovation, we remain focused on improving our operations as part of our evolution into a highly profitable, customer-centric global lean enterprise. We recently made significant progress toward this goal with the hiring of Ken Pucel to fill the newly formed position of Executive Vice President of Operations, Engineering and Lean. This move was preceded by the grand opening of our manufacturing facility in Poland, which will provide a timely capacity increase, enable us to deliver superior customer service, and ultimately serve as a growth catalyst in the EMEA region. These initiatives are important pieces of the infrastructure we are creating to support our continued growth toward becoming an $8.0 billion company.”
Sales for the motorcycles division increased 28 percent to $63.3 million in the 2014 third quarter compared to the same period last year due to continued strong demand for the new Indian motorcycles. Consumer retail demand for Polaris motorcycles, driven by Indian Motorcycle retail sales, was up nearly 30 percent during the 2014 third quarter, while third quarter North American industry heavyweight cruiser and touring motorcycle retail sales were up low-single digits percent versus the 2013 third quarter. During the quarter, the Company added two new models to the 2015 Indian Motorcycle line-up with the addition of the Roadmaster and the return of the Scout. Victory motorcycle retail sales in the 2014 third quarter were down mid-teens percent, impacted by timing delays of shipments of the 2015 Victory Magnum, a new custom bagger, and the prior year’s tough comparison as Victory retail sales were up over 30 percent in the 2013 third quarter. Sales of Polaris motorcycles outside of North America were up over 80 percent in the third quarter of 2014 as compared to the year-ago period, driven by strong demand for Indian motorcycles.
Parts, Garments and Accessories (PG&A) sales increased 24 percent to $219.1 million during the third quarter of 2014 as compared to the same period last year. ORV, motorcycles and snowmobile related PG&A experienced sales growth during the quarter. Sales of PG&A to customers outside of North America increased eight percent during the 2014 third quarter compared to the same period last year. Innovation remains a driving factor in delivering continued growth with over 300 new model year 2015 accessories added to the PG&A product line-up. Additionally, the accessory dollars sold per unit has increased compared to this time last year driven by customer focused solutions like the PRO-FIT storage systems for snowmobiles and additional Lock and Ride accessories for ORVs and motorcycles.
International sales totaled $151.6 million for the 2014 third quarter, a nine percent increase over the same period in 2013. The increase in third quarter sales resulted from strong sales growth in ORV and Motorcycles, offset somewhat by lower snowmobile shipments due to the poor snowfall last winter in the Scandinavian and Russian regions. Asia Pacific sales for the third quarter of 2014 were up 37 percent and Latin America sales increased 48 percent, while Europe, Middle East and Africa (EMEA) sales were about flat in spite of the weak Euro and lower snowmobile sales. Both ORV and motorcycles gained retail market share outside of North America during the 2014 third quarter.
Gross profit increased 16 percent to $388.3 million compared to $334.8 million in the third quarter of 2013. As a percentage of sales, gross profit margin decreased 55 basis points to 29.8 percent of sales for the third quarter of 2014, compared to 30.4 percent of sales for the same period last year. The gross margin percentage declined during the quarter, as expected, due principally to pressures from negative currency movements, offset somewhat by the benefit of lower product costs and higher pricing.
Operating expenses for the third quarter of 2014 declined 95 basis points, as a percentage of sales, to 14.0 percent compared to 15.0 percent of sales in the 2013 third quarter. Operating expenses in dollars increased 11 percent to $182.7 million in the 2014 third quarter compared to $165.2 million for the third quarter of 2013. Operating expenses as a percent of sales for the 2014 third quarter declined due to lower long-term incentive compensation expenses partially offset by higher marketing and advertising expenses related to the launch of various new model year 2015 products and the continued roll-out of Indian Motorcycle.
www.polaris.com
